The present invention relates to systems and methods for providing auction trading systems, and more particularly to auction trading systems that allow traders to place orders on volume-weighted average price (VWAP) contracts.
Electronically based trading systems have gained widespread popularity over the years. Such trading systems are frequently used for trading items ranging from financial instruments (such as stocks, bonds, currency, futures, contracts, etc.) to used household goods (such as old records, baseball cards, antiques, etc.). In many of these trading systems, bid/offer-hit/lift processes are used to negotiate a sale of a given item. In connection with such processes, bids and/or offers for items are entered into a trading system and a hit or take is submitted in response to a bid or offer, respectively, to agree to a sale, or a purchase.
Historically, traders use benchmarks to evaluate their trades. Determining the volume weighted average price (hereinafter the “VWAP”) is one of the most familiar trade evaluation benchmarks. Traders, brokers, institutional investors, and managers determine the quality of their trades by calculating the VWAP and comparing the VWAP to the transactions performed by their respective traders. For example, if a trader purchased a stock today at a price lower than the current cumulative VWAP, the trader bought the stock at a good price—i.e., better than the average buyer of the stock. On the other hand, if the trader bought the stock at a price higher than the VWAP, then the trader overpaid for the stock relative to other buyers of the day. Traders often monitor the VWAP to, for example, predict when short term buying and selling opportunities may arise.
While there are markets that provide trading data such that the VWAP may be calculated, these markets do not provide an opportunity for buyers and sellers to trade on the VWAP. Trading on the VWAP may allow traders to participate in the liquidity of the market.
Therefore, it would be desirable to provide systems and methods that provide traders with an opportunity to trade on the VWAP.